Trust as an IRA beneficiary
This all occurs in New York State.
Dad remarried and in his will stated that a trust may be designated as the beneficiary of his IRA in order for his new wife to be taken care of. He then named the trust as the beneficiary of his IRA. His will states that his children of his first marriage will receive the trust proceeds when their stepmother passes.
Dad passed away after he was 71 and there is about $40,000 in the IRA. Could Dad’s IRA be rolled over into the trust as an IRA? Then the RMD would be taken on the new wife’s life expectancy. The attorney thinks we can ignore the beneficiary designation and roll the money into the IRA of the new wife. The current custodian refuses to issue a check to the new wife’s IRA. I think we have to pay out the IRA to the trust and the estate pay taxes on the full amount. Thanks for any responses.
Permalink Submitted by Alan Spross on Wed, 2010-12-15 22:24
The IRA custodian is only going to pay the funds to the entity named on the IRA agreement as beneficiary, ie the trust. Further, while a will can create a trust, a trust must contain relevant provisions regarding where the funds are to go and when, ie the will is removed from consideration once the trust is directly named on the IRA agreement. For this trust to be effective, there should be some kind of limit on distributions to the spouse, but if the trust is qualified, RMDs will be based on the oldest trust beneficiary, whoever that may be.
Bruce Steiner may wish to add to this post, particularly whether the surviving spouse will be able to roll over funds into her own IRA, or convert them to a Roth IRA, and the federal and NY estate tax issues.
Permalink Submitted by Bruce Steiner on Thu, 2010-12-16 02:34
There is a good chance that there’s a way to get the IRA to the spouse who can then roll it over. See my article on this in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf .